by Douglas McIntyre | November 17, 2009 10:13 am
Everyone was poised waiting for the new Warren Buffett holdings via the Berkshire Hathaway Inc. (BRK-A) 13-F filing last night. The revelation is that the new Warren Buffett is not the old Warren Buffett, even if he is old.
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The new Buffett is not the risk-taker he once was. It appears Buffett is hunkering down and going for the easy moves that are higher up in the food chain. He is moving away from taking long term positions in businesses with risky futures, like newspapers, and instead moving into investments like Wal-Mart (WMT) (he increased his stake in WMT from 19.9 million shares to 37.8 million shares) that are less likely to make large moves, up or down, in the market.
He may have made 20 times his investment in the Washington Post (WPO) and lost it all again. With Wal-Mart, he will be lucky to see a 20% return during his lifetime, but it is a “safer” business to be in.
Buffett dropped Eaton Corp. (ETN) in power management, and WABCO Holdings (WBC) for parts and systems in commercial vehicles. He also cut his stakes in Wellpoint Inc. (WLP) and UnitedHealth Group (UNH), so even if he supports Obama, he is not holding big bets in health-insurance companies.
Berkshire Hathaway’s acquisition of Burlington Northern Santa Fe Corp. (BNI) is a real game-changer. Burlington Northern is a low-cost transport company that will be less cyclical than trucking or air freight, in which Buffett has a stake via United Parcel Service (UPS). So he has a pure-play.
He is dumping (or already has) both Union Pacific (UNP) and Norfolk Southern (NSC) to avoid any issues over the Burlington Northern acquisition. With this deal being roughly $34 billion (or $44 billion if you include the debt), the rail transport play is now close to one-quarter of the total Berkshire Hathaway entity.
The Oracle of Omaha still wants exposure to oil. Even though he sold more of his ConocoPhillips (COP) stake, he did add Exxon Mobil (XOM) to the portfolio. And we already know that he and Bill Gates visited oil sands projects in Canada before deciding against that. And back to Burlington Northern and an energy tie-up, one could argue that this is a China-coal-export bet rather than “an all-in bet on the future of America.”
If you have looked at the deals with General Electric (GE) and Goldman Sachs (GS) late in 2008, and with Harley Davidson (HOG) and Tiffany & Co. (TIF) this year, Buffett is going higher up the food chain with preferred and/or convertible debt, rather than buying common stock. He gets 10% or more in interest and gets much of the upside in the stock.
The new Berkshire is more different than it has ever been, even if it is a wonder as to why Buffett is still holding Moody’s (MCO) and those stodgy media stocks. You have an insurance and reinsurance focus, along with a rail-transport focus. Investing passively in common stocks is now going to be a smaller part of Berkshire Hathaway than ever. Buffett and his successors will always have a focus on common stock holdings, because once you get in that game, it becomes addictive. But the new-old Buffett is looking very different than the old Buffett.
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